What do the numbers say?
They show a sharp slowdown in inflation in France, after 2023 at 4.9%, and 2022 at 5.2%.
According to Eurostat's harmonized HICP index which allows European countries to be compared with each other, France is also well positioned with 1.8% inflation in 2024.
The euro zone's HICP rate stands at 2.4%. The range is from 1.0% for Ireland to 4.5% in Croatia. The leading economic power in the zone, Germany, recorded 2.8% like Spain, and almost as much as Greece, at 2.9%.
Wages are growing more slowly
A first explanation lies in the evolution of wages. France is indeed experiencing “a lower rise in wages than in the rest of the euro zone”, indicates Anthony Morlet-Lavidalie, economist for Rexecode.
In comparison, in Germany, wages “were very low over the last 10 or 15 years and are currently catching up” which is driving up the country's inflation, he specifies.
Less competitive industry
Over one year, the consumer price index for manufactured products fell by 1.4% in December 2024, while it increased by 1.4% in December 2023, indicated INSEE. Several reasons for this decline.
After two years at high levels, notably due to the outbreak of war in Ukraine, the prices of raw materials (energy, metals, etc.) calmed down in 2024. This reduced the production costs of manufactured goods, and therefore their prices. In a very competitive context, France, one of the most deindustrialized countries in Europe, is less armed than some of its neighbors.
-“In a sector like automobiles, for example, prices (of goods) have risen much more in Germany, because they are more high-end products,” continues the Rexecode economist. “France specializes in a few goods; aeronautics, luxury, a little pharmacy, but for the rest, heavy chemicals or metallurgy for example, we have much less capacity to raise prices,” he adds.
Agricultural power
The decline in inflation is also due to the lull in food prices in 2024. And in this sector, France has some additional advantages.
On the one hand, it “is an agricultural power”, which allows it to rely less on imports, and thus to be less subject to international pressure on prices. On the other hand, “French mass distribution is stronger than elsewhere, which makes it possible to negotiate lower prices” for consumers, underlines Mr. Morlet-Lavidalie.
Remains of energy measures
France “made much more use of price control tools, energy prices, and rents too, which were able to slow down the transmission of the inflation shock” when prices were at their highest, from 2022- 2023, comments François Bossy, chief economist France for Société Générale.
For example, the price shield on gas and electricity put in place at the end of 2021 and extended to 2024 has helped to contain the rise in prices which has had a greater impact on neighbors.
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